Five financial steps to pursue your passion

A woman wearing a backpack looks out over a field.

You may need money to pursue your passion. Here are five financial steps to help you get there.

For some individuals, what they do every day is also their life’s passion. For others, their passion lies elsewhere. For example, perhaps you would like to travel more and even find an opportunity to live abroad. Or perhaps you have a hobby you would eventually like to turn into a business. Alternatively, you may have discovered you would like to pursue a new career path and want to go back to school to retrain.

If you’re among those who have big dreams, you may need money to do it. Here are some financial steps to consider to help you out:

1. Define your goal.

Your goal is just like it sounds; it’s the purpose for the money from your investments. When it comes to pursing your passion, take the time to define your goal as specifically as possible. That should help you better determine the amount of money you’ll need.

2. Determine your time horizon.

Have you determined when you want to pursue your passion? Knowing your time horizon is important as it’ll determine how long you have until you need to tap into your investments. The longer your time horizon, the more conservatively you may be able to invest. If you have a shorter time horizon, you might have to be more aggressive, increasing the possibility you’ll incur losses, especially over the short term.

3. Assess your risk tolerance.

Your risk tolerance is the amount of volatility in your portfolio’s value you’re comfortable with. If you find you can’t sleep because you’re worried about your investments — especially when there’s market volatility — you probably need to adjust your investments to suit your risk tolerance.

4. Establish an asset allocation.

Your asset allocation is simply how you want to divide up your investments among different types of investments, such as:

Stocks. Historically, stocks have offered attractive returns, but along with those returns, there also have been periods of volatility. If you are thinking long-term, your allocation to stocks could potentially be larger because you may have more time to ride out any short-term market volatility that occurs.

Bonds. One reason investors like bonds is because their prices have historically been relatively stable compared to stocks. Keep in mind, however, that bonds’ returns may be significantly less than stocks and bond investments still may result in losses.

Cash alternatives. These are relatively lower-risk, lower-return investments. On the upside, they can be easily be converted into cash when it’s needed. On the downside, their returns may not keep up with inflation.

Once you’ve decided on the types of investments to include, you need to determine how much of each is appropriate based on the amount of risk you want to take and your timeline.

5. Get help if you need it.

Although creating a plan to help you pursue your passion may seem simple enough, it has lots of “moving parts.” That’s why many investors opt to either work with a professional financial advisor or to use an automated investing program, such as Wells Fargo Advisors Intuitive Investor®. With Intuitive Investor, you can start with an initial investment of as little as $500, and after you answer a brief survey, it will determine an asset allocation for you. In addition, financial advisors are standing by to offer help if you need it.

All investing involves risks including the possible loss of principal. Equity securities are subject to market risk which means their value may fluctuate in response to general economic and market conditions and the perception of individual issuers. Investments in equity securities are generally more volatile than other types of securities.

Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.

Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC (WFCS) and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. Wells Trade® and Intuitive Investor® accounts are offered through WFCS.